Optical-Component Sales Are Expected To Drop 10%, According to New Report
By Ben Dummett June 1, 2001
Dow Jones Newswires
SAN FRANCISCO -- World-wide sales for optical components are expected to decline by 10% this year, and the outlook for the optical-transport market in North America isn't much better, according to telecommunications-research firm RHK.
The findings are more confirmation that optical-component manufacturers and network vendors continue to face a significant slowdown in demand for their optical gear. It also supports the view that prices for components and network-transport systems are under pressure.
RHK forecasts that the value of the global optical-component market will decline this year to about $4.5 billion from $5 billion in 2000, said John Lively, director of optical components at RHK. Optical components are used in high-speed transmission systems and wave-division multiplex equipment, which is used to boost network capacity.
Some of the big optical-component manufacturers are JDS Uniphase Corp., Corning Inc., Nortel Networks Corp., Agere Systems Inc. and Alcatel SA.
In addition to a decline in sales of optical components, RHK expects the North American market for optical-transport equipment to grow at a slower rate this year than earlier thought. This market is expected to increase to $21.6 billion in 2001 from $19.6 billion in 2000, down from the firm's earlier prediction of $28.3 billion.
Manufacturers of optical-transport systems include Nortel, Ciena Corp., Lucent Technologies Inc., Cisco Systems Inc. and Alcatel among others.
The expected decline in the optical-components market is being driven by a significant buildup of inventories and a slowdown in spending by the carriers on network-system equipment. Still, RHK suggests that demand could pick up later this year.
"Anywhere from July to October I think is when we should start to see a pick-up in activity, generally speaking," Mr. Lively said. Declining to provide specifics, he added that demand for some types of components will improve faster than others.
Mr. Lively also noted that component suppliers will continue to face pricing pressure this year, citing a greater number of competitors in the market and more available capacity.
Earlier Thursday, CIBC World Markets analyst Jim Jungjohann lowered his investment ratings on a number of component manufacturers, on his belief that network vendors are starting to seek average price discounts for components of up to 25%.
Prices for optical-transport gear in North America have certainly come under significant pressure, prompting RHK, in addition to a slowdown in capital spending by the carriers, to reduce its 2001 growth outlook for that market. "Prices for these systems have declined dramatically," largely because of increased competition in the market among the vendors, said Brian Van Steen, a senior analyst at RHK. |
